Additional Costs Allowance

The Additional Costs Allowance (ACA) was an expense allowance paid to members of the British House of Commons between the years 1971 and 2009 and was worth up to £24,006 per annum in the financial year 2008-2009. It was intended to cover the "reasonable additional cost to provincial Members of staying either in London or their constituency, when engaged on Parliamentary duties" and could be claimed by every Member of Parliament except those members who represented Inner London constituencies who alternatively received a London weighting allowance as an addition to their pay.

Whilst the ACA was intended to reimburse MPs for "expenditure wholly, exclusively and necessarily incurred when staying overnight away from their main home for the purpose of performing parliamentary duties", in practice it was commonly used by MPs to pay for the cost of acquiring a second home, and was therefore generally referred to as the Second Homes Allowance. It should also be noted that the fact that the Additional Costs Allowance or ACA ceased to be payable from 2009 onwards was simply that it was decided to rename it as Personal Additional Accommodation Expenditure.

History of the ACA

The Additional Costs Allowance (ACA) was first introduced by Resolution of the House in December 1971 in response to a recommendation by the Top Salaries Review Body (TSRB) that members should be reimbursed for the cost of maintaining two homes were necessary. As it turned out the TSRB had actually recommended the payment of a fixed daily rate of subsistence allowance. However the Government of the day had concluded, after duly consulting members, that this "would be unduly complex, extremely difficult and unsatisfactory to operate and, in some cases, too restrictive" and decided instead to introduce a system based on the reimbursement of members' additional living costs subject to an annual limit.

With effect from the 1st January 1972 the annual limit was set at £750, at a time when the price of the average house was around £6,000. It remained at that level until 1974 when it was increased to £950, and then £1,639 in the following year, at which point it was decided that the ACA should be up rated each year in line with the centralised Civil Service subsistence rates. However in 1994 when devolved pay bargaining was introduced in the Civil Service it was decided to dispense with central setting subsistence rates for the Civil Service, and so from 1995 onwards the ACA was increased in line with inflation as measured by the Retail Price Index (RPI).

The net effect of all these changes was simply that the ACA broadly maintained its real value over the years. Until that is the year 2001 when the Senior Salaries Review Body (SSRB) issued a report on parliamentary pay and allowances. As it turned out the SSRB had not been asked to review the ACA and therefore had nothing to say on the subject. It did however recommend an increase in the Overnight Allowance paid to members of the House of Lords. When the House of Commons considered the SSRB's report one Clive Betts, the Labour member for Sheffield Attercliffe, moved an amendment to increase the ACA in line with the proposed increase in the House of Lords Overnight Allowance. Now, as Robin Cook, then Leader of the House of Commons noted at the time, this would mean "a very large increase indeed" of 42 per cent in the ACA, and warned that it "would be challenging to explain to Members of the House of Lords, let alone to justify to members of the public". Nevertheless the House supported the amendment by 229 votes to 117 as members justified the increase on the grounds that the price of houses in London had increased by more than the RPI.

The only other change that took place in the ACA occurred in February 1985, when the Leader of the House of Commons, John Biffen, responded to a written question to confirm that claims for mortgage interest payments were allowable under the ACA. This statement might be interpreted as meaning that mortgage payments would in future be reimbursed, but then again, it might equally well have been nothing more than a confirmation that this had always been the case.

Supplementing pay

In 2007 the Senior Salaries Review Body (SSRB) conducted another Review of parliamentary pay, pensions and allowances, and whilst it reported that it was "satisfied" that the ACA was "necessary and set at an appropriate level", it nevertheless noted that it was aware that "at times" it had been "seen by MPs as a means of supplementing their pay" and that it was "still regarded by some as ambiguous". Perhaps the SSRB had in mind the case of one Michael Trend.

Some years earlier on the 15th December 2002 the Mail on Sunday published a story which alleged that Michael Trend, the Conservative member for Windsor, had submitted claims under the ACA for a London home which "he did not in fact occupy". As it was, the Mail had misunderstood the rules; it believed that the ACA was "intended to pay for London accommodation for MPs from far-flung constituencies", whilst the rules were not in fact that restrictive.

It turned out that Trend had actually claimed the ACA in respect of his home in Windsor, and took the view that he was perfectly entitled to do so because his main home was in London. Sadly he didn't actually have a home in London at all, simply an arrangement to stay at a friend's house when the need arose, and as a result of the Mail on Sunday story, Trend went to discuss the matter with Archie Cameron, the Director of Operations of the Commons Department of Finance and Administration, who pointed out to him that the purpose of the ACA was to reimburse members for the cost of having a second home, and that he only had the one.

Trend claimed that he "had a misunderstanding, honestly and genuinely held, about the terms of the ACA" and that the whole arrangement had been agreed with the Fees Office many years before, but since neither he nor the Fees Office had retained any records to either support of disprove this statement, no one was any the wiser. In the circumstances Trend voluntarily repaid the sum of £90,277, but was later "suspended from the service of the House" for a period of two weeks by the Select Committee on Standards and Privileges, and left Parliament at the General Election of 2005.

In the wake of the Trend scandal, Martin Bell, the former independent member for Tatton, said that the system was "far too lax" and belonged to "the days when the Commons was a club and everyone's word could be trusted", and said that many MPs simply claimed the maximum and that nobody ever asked for a receipt. Norman Baker, the Liberal Democrat member for Lewes, concurred with this view and said that the systems were "inadequate and open to abuse", and that he had "tried to find out how much MPs claim in various types of expenses" only to be told by the Fees Office that this couldn't be done.

A glimpse behind the curtain

The case of Michael Trend was a perfect illustration of the fact that no one had any idea of how much any particular Member of Parliament was being paid in respect of the ACA. That changed when the first lists of Commons expenses were published in 2004 that the public was first told how much each member had received going back to the 2001-2002 financial year. Unfortunately the only information that was disclosed was the total amount paid; there was no further analysis and no supporting documentation in the form of receipts was made available. Of course this only served to prompt a further series of questions, such as how Tony Blair could justify claiming £43,000 over the four years in respect of his house in County Durham which had only cost him £30,000 to begin with. (The answer, apparently, was because it doubled as his constituency office.)

Similarly in 2006 the Mail on Sunday was curious as to how Ruth Kelly could possibly have spent a total of £72,781 in four years on her constituency home. Since the Mail had established that she and her husband had borrowed £101,148 to acquire the "four bedroom detached house in Horwich, near Bolton", the paper was able estimate that she would have needed to spend no more than £7,500 per year to fund the cost of her mortgage and other bills, and simply wondered where the other £40,000 had gone. The only response the Mail received from Ms Kelly was a mobile phone text message sent by an aide at the Department for Education and Skills which read "From julie, dfes, 'all money claimed is in strict accordance with the rules set out by the Fees Office.' i have nothing to add to that comment."

As the paper noted, the rules allowed Ms Kelly to make "additional claims for furniture, domestic appliances, telephone and security costs - as well as for repairs and decoration" and the Mail had no way of knowing what they were. Neither was the Mail certain as to whether Ms Kelly was still claiming for the cost of her constituency home or another property in London. Without knowing what property was the subject of the claim, and without any supporting detail or documentation the Mail could not reach any definite conclusions regarding the propriety of Ms Kelly's claim under the ACA.

That in a nutshell was the question; what exactly was the taxpayer paying for under the ACA? And why were MPs so reluctant to answer questions regarding their expenditure claims? This is what drove a number of journalists to use the Freedom of Information Act in an attempt to extract the information from the House of Commons, and it was the eventual success of this campaign that finally led the House of Commons to agree to publish the details of MPs' expenses. (See MPs' Expenses and the Freedom of Information Act.) And it was the subsequent leaking of the pre-publication details to the Daily Telegraph that led to the MPs' Expense Scandal that occupied the attention of the nation from the 8th May 2009 onwards.

Indeed it was payments under the ACA that were the initial focus of the long series of exposes that were subsequently published by the Daily Telegraph and which uncovered a number of 'abuses' of the system, both real and imagined. Prominent amongst these were the phantom mortgage trio of David Chaytor, Elliot Morley, and Ben Chapman who all claimed for the cost of interest on mortgages that simply did not exist; Bill Wiggins who claimed in respect of the wrong property; Douglas Hogg, otherwise known as the Viscount Hailsham, who claimed for the cost of clearing his moat, and Peter Viggers who submitted a claim for a 'pond feature' or duck house for the grand sum of £1,645.